AutoZone Registers Strong First Quarter Results

U.S. retail-wholesale auto parts chain AutoZone, Inc. reported strong first quarter performance in virtually all key metrics.

AutoZone reported net sales of $1.6 billion for its first quarter (12 weeks) ended November 21, 2009, an increase of 7.5% from the first quarter of fiscal 2009 (12 weeks).

Domestic same store sales, or sales for stores open at least one year, increased 5.6% for the quarter. Net income for the quarter increased $11.9 million, or 9.1%, over the same period last year to $143.3 million, while diluted earnings per share increased 26.4% to $2.82 per share from $2.23 per share in the year-ago quarter.

All monetary values in U.S. dollars

For the quarter, gross profit, as a percentage of sales, was 50.3% (versus 50.1% last year). Gross margin increased by 20 basis points primarily due to leverage of distribution costs from lower fuel charges and improved efficiencies. Operating expenses, as a percentage of sales, were 33.9% (versus 34.0% last year). Operating expense leverage from increased sales volumes was offset by ongoing investments in our hub stores and an increase in pension expense due to the recognition of actuarial losses primarily from lower than expected investment performance in fiscal 2009.

Under its share repurchase program, AutoZone repurchased 1.4 million shares of its common stock for $204 million during the first quarter, at an average price of $144 per share. The company has $105 million remaining under its current share repurchase authorization.

The company’s inventory increased 3.5% over the same period last year, driven by new store openings. Inventory per store was $508 thousand versus $512 thousand last year. Net inventory, defined as merchandise inventories less accounts payable, decreased on a per store basis to $17 thousand from $43 thousand last year.

“We are pleased to report a 26.4% increase in diluted earnings per share, which is our 13th consecutive quarter of double digit EPS growth,” said Bill Rhodes, chairman, president and chief executive officer. “I would like to thank all AutoZoners across North America for their dedication and commitment to providing the type of customer service and trustworthy advice our customers have come to expect from AutoZone. This past quarter, both our Retail and Commercial businesses reported strong sales growth. We remain committed to our plan of continually improving our parts coverage, hiring, retaining and training the best automotive parts professionals, and growing our Commercial business. Additionally, we reported a 24.9% trailing four quarter return on invested capital ratio this past quarter, as we remain committed to our disciplined approach of growing operating earnings while utilizing our capital effectively.”

During the quarter ended November 21, 2009, AutoZone opened 38 new stores, closed two stores, and relocated one store in the U.S. and opened 5 stores in Mexico. As of November 21, 2009, the Company had 4,265 stores in 48 states, the District of Columbia and Puerto Rico in the U.S. and 193 stores in Mexico.